VENKATARAMANA RAO Vs. P RAMACHANDRA RAO

JUDGEMENT

(1.) THE appellant Venkataramana Rao, one of the beneficiaries of an award dated 14-6-1986 has assailed the correctness of an order dated 8-3-1989 passed by the learned Civil Judge at mangalore whereby the award in question has been set aside. Briefly stated, the dispute in question concerns the estate of one Sharadamma who died on 7-12-1985 and the question arose as to on whom the estate would devolve and secondly, to what extent. The matter was referred to the arbitration of two arbitrators Sri. P. Ramachandra Rao, a retired Civil Judge and Sri. B. Ananta Somayaji, a Senior Advocate of Mangalore. There were various contestants. The principal problem arose because of the fact that Sharadamma's father-in-law the late venkataramaniah had as many as three wives, the first of whom did not have any children but the second two wives did have children resulting in two distinct branches of the family. The arbitration proceedings culminated in an award whereunder the arbitrators held that the daughter of the brother of Sharadamma's late husband Ramachandra Rao by name Vishalakshi would be the sole heir to the estate. However, the award indicates that it was decided to give effect to certain wishes of the deceased Sharadamma and therefore, a small share of the property was, with Vishalakshi's consent, held to devolve on the present appellant Venkataramana Rao. The award in question was challenged on several grounds and after a detailed hearing the court set aside the award for two main reasons. In the first instance, the court took a rather serious view of the fact that one of the learned arbitrators by the name of Somayaji was shown to have been the lawyer for deceased Sharadamma during her lifetime and in the award, a sum of Rs. 15,000/- has been directed to be paid over to the learned arbitrator B. Somayaji on the ground that this represents the outstanding professional charges due to him. The Court has held that this clearly demonstrates that the learned arbitrator was interested in the dispute in question and that therefore, the award stands vitiated. The second ground on which the Court has interfered is principally that the learned Judge has rejected the contention that Vishalakshi would be the sole beneficiary of the estate and has held that it would be necessary to divide the property between the legal heirs of deceased Sharadamma, it is against this order that the present appeal has been filed.

(2.) MR. Holla, learned counsel representing the appellant had taken serious objection to both the grounds. As far as the question of personal interest goes, he demonstrates to me that the principal reason why Somayaji was nominated as the arbitrator was because he was a senior member of the family but more importantly a person known to the family in so far as he had handled litigation on behalf of the deceased Sharadamma and as her legal advisor had also assisted and advised her on many occasions. He submits that in this background, Somayaji was the most suitable and most competent person to resolve the family dispute which was why the parties willingly and consciously appointed him as one of the arbitrators. Learned counsel demonstrates to me that at no stage during the proceeding did any of the parties indicate that their confidence in the arbitrator is undermined nor at any stage did they object to his continuing with his arbitration and making the award. On the other hand, learned counsel has demonstrated to me that the various contesting parties had taken part in the proceedings and that they had even endorsed the order sheet from time to time. Also, what he demonstrates to me is that one of the heads of reference to the arbitrators was that they were required to make an inventory of the various heards of the estate and so also compute the liabilities or outstanding and it was for this reason that the arbitrators held that the outstanding professional charges due to Somayaji to the extent of Rs. 15,000/- had to be paid to him out of the estate. Learned counsel submits that this has in no way affected the fairness or impartiality of the arbitrator and that this is no ground on which any court could have come to the concision that the award is vitiated. In this context, he has placed strong reliance on a decision of the Supreme Court reported in 1994 (6) JT SC 412 in which, in more or less similar circumstances the Supreme Court has observed that where parties have participated in the arbitration proceedings and have invited an award, they cannot seek to attack the validity of the award on the ground of disqualification of the arbitrator. The Supreme court reiterated the principle earlier laid down in the decision reported in AIR1988 SC 2045 , 1989 (1 )ARBLR34 (SC ), JT1988 (3 )SC 743 , 1988 (2 )SCALE586 , (1988 )4 SCC462 , [1988 ]supp2 SCR462 , 1988 (2 )UJ625 (SC ). Mr. Holla is supported in his submissions by the learned advocate who represents the beneficiary vishalakshi who is Respondent No. 8 to this proceeding.

(3.) ON the other hand, the learned advocate who represents the respondents has vehemently submitted that there are a host of decisions in relation to not only arbitration proceedings but judicial proceedings in which the fundamental principle has been laid down that if the Presiding officer or the Arbitrator is in any way interested in the proceedings or has represented any of the parties to those proceedings that the rule of professional ethics mandates that the person should not hear the matter or decide it as there is always the possibility of some degree of bias creeping in. Mr. Haranahalli and Mr. Achar have strongly submitted that they can demonstrate from the record which they have in fact done before me that Somayaji had not only appeared on behalf of sharadamma in some earlier litigation but more importantly that he was advising Sharadamma, which is clear from some of her letters that have been produced. They have however, alleged that the arrangement where under the appellant has benefited to the extent of some property is not something which emerges out of the dispute over heirship but that on the other hand, it is clear from the correspondence that Somayaji had given certain advice to the deceased with regard to transfer of some property to the appellant. Learned counsel therefore submitted that it is not merely the interest of Somayaji to the extent of Rs. 15,000/- which he has awarded virtually to himself but also the aspect that he had something to do with the proposed transfer of some property to the appellant and he submits that in this background, the bias that has been alleged is well founded and that it is really in this background they have placed reliance on a decision of the Calcutta High Court reported in Indian Decisions Vol. 1 p. 142 (sic) wherein a Division bench of the Court upheld the view that where the arbitrator was the retained pleader of the plaintiff and had not disclosed this fact before the arbitrator was appointed, that the award would stand vitiated. Essentially, the challenge proceeds on the ground that learned counsel have submitted that an arbitrator gets disqualified from adjudicating on any dispute with which he is in any manner connected and they submitted that in the aforesaid circumstances even if there is no special interest it can be demonstrated that the connection is established. While they concede that there may be no direct nexus with any of the parties, they have contended that the arbitrator definitely had a personal financial interest to the extent of the money that was due to him and that therefore, the decision of the trial Court is liable to be upheld.